US: Without tax reform division may swamp the USD - AmpGFX

Political turmoil has risen to the fore again in the USA and there are so many parts intertwined in the political and social turmoil in the USA that it is hard to know how much it will affect the real economy or financial markets, according to Greg Gibbs, Analyst at Amplifying Global FX Capital Pty Ltd.

Key Quotes

“It is a moving feast that will persist for the foreseeable future. It has weighed on the USD this year, but the USA economy continues to truck along, strengthening recently, helping sustain support for the USD.  Hope for positive news has coalesced around tax reform, which is struggling for air in the political and social discourse.  Tax reform is potentially very positive for the US economy and the USD dollar, but it seems that the market is still giving it a relatively low delta.  Tax reform is not easy, with many special interests to balance.”

“On the other hand, it has become very important for the Republican Party. Failure to deliver threatens to unravel their majority in one or both Houses of Congress.  Part of the reason why the USD is struggling to gain traction on prospects for tax reform is that the market must also weigh the risk that it fails and what follows may be political and social disintegration in the USA that makes the current political uncertainty seem like a walk in the park.”